Update on Excellence The Nypro Example: A Strategic Approach to Molding ... · Update on Excellence The Nypro Example: A Strategic Approach to Molding ... During the 1980s Nypro Inc

Update on Excellence

The Nypro Example: AStrategic Approach to Moldinga Lean Enterpriset̃ „”™‰•˜“„šŒ•”@›™Œ”Š@„@†•““•”@Š„“ˆ@–’„”@‰•˜@š‹ˆ@ˆ”šŒ˜ˆ@•˜Š„”Œ¡„šŒ•”N

Jeff Schaller, Ph.D.

39Fourth Quarter 2002

During the 1980s Nypro Inc. imple-mented a strategy that resulted inthe company firing 60 percent of itscustomers. What were the results ofthis unorthodox strategy? Nyprohas increased sales 1212 percentover 16 years, accompanied by 16years of consecutive profit increas-es. During the past three yearsNypro has been implementing leanthroughout its enterprise. Nypro'slean implementation is a vehiclethat is being used to help the com-pany transform itself for futuregrowth and profitability. Recently60 executives from across theUnited States gathered at Nypro'sClinton, MA headquarters for aone-day AME "kick the tires" work-shop. During this workshop Nypro'stop managers described how Nyprois transforming into a lean enter-prise.

An important lesson that par-ticipants learned at the workshop isthat lean must be strategically driv-en. Many companies attempt tobegin the implementation of leanby focusing on tools or techniqueslike the 5Ss or setup reduction.

Implementations using this type ofapproach usually fizzle out andeither fail or deliver very minorbenefits. To have a successful leanimplementation that results in amajor transformation that gener-ates dramatic benefits, it is criticalthat the organization first establishwhere it wants to go and developgoals. Doing this provides the direc-tion for the lean implementationand a game plan that the organiza-tion's team members can followduring the implementation.

Nypro provides an excellentexample of how a company cantransform itself with a strategically-driven lean implementation. Thisarticle describes some of the uniquefeatures of Nypro's lean enterprise.First a brief description of the com-pany is provided.

Company Background

Nypro was founded in 1955and has evolved into the leadingglobal precision plastics injectionmolder. The company employsabout 9000 people in 29 molding

locations, five dedicated mold-building locations, and two "standalone" design centers. These facili-ties are located in 12 countriesaround the world. Nypro is the 18thlargest ESOP company in NorthAmerica. This year Nypro will moldand assemble over six billion parts.These parts are used in a wide vari-ety of products in the healthcare,electronics, telecommunications,automotive, and consumer indus-tries. Most people are familiar withthe names of the "Fortune 1000"customers that incorporate Nypro'sproducts into their own including:Dell, Hewlett-Packard, Johnson andJohnson, Pilot Pen, Nokia, andEricsson. Total sales including jointventures were $681.8 million during2001, a 15 percent increase over theprior year and sales are expected toexceed $800 million during 2002.

Key Elements of Nypro'sLean Enterprise

A key to Nypro's successfultransition to a lean enterprise is afocus on the big picture and the


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Target Volume 18, Number 4

development of a coherent strategythat provides a common game planfor the entire organization. Thisstrategy also provides direction forthe various functional units of thecompany including marketing,manufacturing, design, and suppliermanagement to work together toincrease the company's competi-tiveness. Top management at Nyprosupports and is actively involved inthe lean implementation. This fostersteamwork between the functionalunits and insures that lean is imple-mented at all of Nypro's locationsacross the globe. Brian Jones,Nypro's president, is a model exam-ple of top management commit-ment to the implementation of lean.He has been personally involved inthe Association for ManufacturingExcellence (AME) during the past fewyears and continues to serve as theorganization's president.

Many elements of a lean enter-prise have been adopted by Nypro.This article, however, will focus onkey elements of Nypro's approachthat will be of interest to others whoare attempting to create a leanenterprise to dramatically expandtheir business. These elements are:lean is strategically driven, leanmarketing, innovative productdesign, and the lean production sys-tem that is referred to as the HighVelocity System or HVS at Nypro.

Lean Enterprise Strategy

Nypro began to develop its cur-rent strategy about three years agowhen the company's managementrealized that external global forceswere going to have a major impacton the injection molding industry.To provide a perspective of theimpact of these forces, Brian Jonespointed out that over the last threeyears, 20 injection molding compa-nies in North America filed forbankruptcy protection. This number

represents about half of Nypro'smajor competitors in North America.

The first step of the lean strat-egy development process was toidentify driving forces. Nine drivingforces were identified and the com-pany began the process of develop-ing strategies to address them. Forexample, one of the identified driv-ing forces was: Global companiesare outsourcing functions that arenot their "core competency." Toevaluate Nypro's position withrespect to this driving force, Nyproplotted each of its customers on theStrategic Alignment matrix shownin Figure 1.

The horizontal axis of the

matrix represents the range of serv-ices that are offered by the supplier.As the supplier offers moreadvanced services to a customer,the supplier's intimacy with the cus-tomer increases and the verticalintegration of the customer decreas-es, which allows the supplier to addmore value and increase its margin.Nypro's goal is to move from thebottom left hand corner to the upperright hand corner of the matrix bybecoming an integrated supplier forits customers. Nypro has alreadystarted the process of shifting from abasic molder of plastics parts tobecoming an integrated supplier.During 1995 about 95 percent of

Figure 1.



Nypro's business was molding andfive percent from integrated supply.During 2000 about 60 percent wasmolding and 40 percent integratedsupply, and the goal for 2005 is for20 percent of the business to bemolding and 80 percent integratedsupply.

Based on the output of theprocess described above, Nypro hasdeveloped plans that will allow it tocompete in the current environ-ment and position the company forthe future. These plans includedeveloping a global network offacilities and technical expertise tomeet the needs of large multina-tional customers. By servicing cus-tomers globally on a regional basis,Nypro will be able to cut productdevelopment time, reduce moldingcost, and provide just-in-time deliv-ery. These strengths enable thecompany to cement relationshipswith customers and grow sales andprofitability.

This strategy has implicationsfor the various functional areas ofthe company. In order for Nypro toobtain the skills, expertise, andresources needed to move from abasic molder to an integrated sup-plier, a great deal of cash will berequired. This is a major reason forimplementing lean production atthe manufacturing sites. By reduc-ing waste and increasing the veloc-ity of production, the company isable to reduce inventory. This cre-ates cash that can be used to fundthe investments needed to trans-form the company.

Also, by implementing lean,Nypro is able to standardize itsfacilities across the globe so thathigh-quality standards can be met.For example, Dell requires that acomponent be produced to thesame specifications regardless ofwhere it is produced. If any changeat any plant is to be made to a

product that Dell buys, Nypro mustimplement that change at all of itsplants and get approval from Dell.

Lean Marketing

Driven by the company's strat-egy, Nypro has developed anapproach for marketing that isreferred to as lean marketing. Thelean marketing concepts used byNypro are: industry focus and seg-mentation, lean customer selection,open book price modeling, 24/7global communications, and globalresources that are strategicallydirected but managed locally sointimacy with the customer isobtained. These concepts areapplied in three phases: 1) the up-front targeting and marketing tocustomers, 2) negotiating priceswith customers, and 3) the ongoingservicing of the customer thatcements the relationship.

Nypro created four businessunits with a technical and marketingperspective: Healthcare, Electron-ics/Telecommunications, Auto-motive, and Consumer/Industrial.The focus and segmentation byindustry, combined with lean cus-tomer selection, allow Nypro toachieve what is referred to as the fourRs: right applications, right cus-tomers, right capabilities, and rightstrategy. Within each industry, poten-tial applications for Nypro were iden-tified. Steve Glorioso, vice president ofthe Electronics/Telecommunications(E/T) group at Nypro, used his busi-ness unit as an example of howindustries are segmented. There arefour segments in the E/T industry:Electronic Components, ElectronicsPeripherals, Telecommunications andWireless, and Consumer Electronics.

Each segment was furtherdivided into sub-segments. Forexample, the Electronics Peripheralssegment was broken into the follow-

ing sub-segments: Storage Devices,Personal Computers, NetworkProducts, and Hand Held Products.Applications were identified withineach sub-segment. For examplehard drives and floppy drives areapplications in the Storage Devicessub-segment. Nypro then evaluateseach application to determine if thecompany has the right capabilitiesfor the application. For example, toevaluate the laptop computer appli-cation, the trends and technologies,and expectations customers have ofsuppliers were identified as well asthe current competition. Nypro'sstrengths and weaknesses regardingthe application were also evaluated.

Nypro uses its industry seg-mentation analysis, describedabove, to determine high-growthapplications. This analysis is alsoused as one of the criteria for leancustomer selection. In addition tohigh-growth applications, the com-pany targets industry leaders, usesa qualification process to determineif there is a reciprocal fit with thepotential customer, and focuses onobtaining customers with thepotential to generate $10 million ofbusiness annually with Nypro.Figure 2 shows how its customerbase has changed since 1989.

In 1989 Nypro had many morecustomers but they were smaller insize. One of Nypro's goals is to con-tinue to move its customer base tofewer, larger customers by 2005.Having customers that provide alarge volume of business allowsinvestment in resources necessaryto effectively supply customers.

Nypro uses open book pricemodeling to develop prices of prod-ucts for each customer. With thisapproach, the negotiation is doneup front and time is saved in futurenegotiation and updating of prices.A key to this approach is Nypro'swillingness to share cost informa-


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tion so a pre-negotiated cost modelcan be developed. This modelincludes labor rates, overhead,profit, scrap, yields, and other infor-mation. Figure 3 shows an exampleof the model.

By working with the customeron this model, the cycle time forquotations and pricing changes isreduced and multiple price negotia-tions are eliminated. This processalso enables better forecasting offuture prices and cost reductionsand facilitates cost reduction shar-ing with customers.

After a customer has beenobtained, Nypro establishes com-munication channels with the cus-tomer. All of the plants have 24/7capability to communicate withcustomers. Nypro also uses EDI(electronic data interchange) forforecasts, orders and billing, FTP for

transferring design data, a salesprofile and tracking system, globalconference calls, video conferenc-ing, and extranet sites for variousdata and program status.

Figure 4 shows how Nypro haschanged its approach to servicingcustomers. With this approach, asmall global team complements aregional network of manufacturingplants. Also, onsite Early SupplierInvolvement (ESI) is provided tohelp with the engineering and mar-keting interface. The benefits ofusing ESI include faster turnaroundtime on project launches and fasterresolution of issues.

Innovative Product Design

Radius Product Development,a joint venture that was formed in1992, consists of 30 team members

including industrial designers,mechanical engineers, and imple-mentation specialists. The compa-ny has offices in Clinton, MA andChicago, IL. Radius handles Nypro'sproduct design projects as well asexternal clients that do not useNypro to mold the designed prod-uct. A key requirement that Radiusinsists on when obtaining a client isthat the manufacturer for the prod-uct must already be identified andinvolved in the project. SteveCallahan, president of Radius, saysthis requirement exists becauseRadius uses an integrated develop-ment process that is modeled onthe platform team approach devel-oped at the Chrysler Corporation.

At Chrysler the old way ofdeveloping new cars was tosequentially progress through therequired steps. First a design would

Figure 2. Nypro management realized that having customers providing a large volume of business allows investment in resources necessary toeffectively supply customers.


Figure 3. Nypro shares cost information so a pre-negotiated cost model can be developed; an example is shown.

Figure 4. A small global team complements a regional network of manufacturing plants. Onsite Early Supplier Involvement (ESI) helps with theengineering and marketing interface, enabling faster turnaround time on project launches and faster resolution of issues.


be developed and approved, thenproceed to engineering, then topurchasing, and finally to manufac-turing. Chrysler created cross- func-tional teams, referred to as Platformteams, which included design,engineering, purchasing, and man-ufacturing personnel. By using thePlatform teams, Chrysler was ableto reduce development time from60 months to 23 months.

Radius uses a team approachthat is similar to the ChryslerPlatform teams. Two of the goals ofRadius are to achieve "speed to vol-ume" manufacturing and to incor-porate design for lean manufactur-ing into its development process."Speed to volume" manufacturingrefers to the time that elapses fromproduct conception to when manu-facturing is able to produce at thevolume required by customers.Companies have traditionallymeasured the time involved in theproduct development process from product conception to when thefirst unit was produced. Design forlean manufacturing uses manufac-turing involvement early in theprocess to minimize design errorsthat cause manufacturing costs tobe higher.

Callahan used a simple casestudy to illustrate Radius'sapproach. The case study was aproject to develop a new MicrosoftOffice package for the Mac user. Akey challenge of the Microsoft proj-ect was that the product had to bedeveloped and shipped within a122-day period. This timelineincluded concept development,engineering, tooling, qualification,and production. The first step wasto identify the client's needs: a newpackage for Office 2001 Mac. Thefirst suggestion that was investigat-ed was to use the current Officepackage (for PC users). The advan-tages of this approach were thatmanufacturing can already produce

the package and retailers like it.The problems with this suggestionwere that Mac customers yawn at itand the brand manager didn't wantit. Manufacturing and engineeringdeveloped a new clam-shapedpackage representing the attributesof the Mac community: style, cre-ativity, and fun. This productreceived an industrial design excel-lence award from the Institute ofPackaging Professionals. In an arti-cle about the award, Peter Kuttner,of FAIA Cambridge SevenAssociates, is quoted: "By com-pletely rethinking the package,they've managed to eliminate mostof the waste found around so muchboxed software. The team created acase that looks like the Mac world,holds extra CDs beyond the MS disk,and will handily survive life in a softbriefcase." Best of all, according toCallahan, was that the 122-daydeadline was met.

The High Velocity System(HVS)

At Nypro the lean productionphilosophy is embodied in whatNypro refers to as the High VelocitySystem (HVS). Angelo Sabatalo,Nypro's director of training andorganization development, offersthe following definition of HVS:"The High Velocity System is ademand-pull value stream impact-ing all activities required to design,build, and deliver products andservices to the marketplace."

Under HVS, Nypro systemati-cally applies best practices to iden-tify and remove waste and non-value added activities from allprocesses, reducing leadtimes andimproving first time through quality.To implement the program, Nyprotargeted five major processes forimprovement. These processes arereferred to as HVS cycles and con-sist of the following:

-Program life cycle — the processof introducing and launching new products and services.

-Order fulfillment cycle — the process of receiving, procuring, producing, shipping, servicing, and invoicing orders.

-Asset life cycle — the process of designing, using, and disposing of facilities, equipment, and tooling.

-Employment life cycle — the process of employee recruitment,development, evaluation, com-pensation, and recognition.

-Continuous improvement — the process of establishing, monitor-ing, and driving organization performance objectives and ini-tiatives.

Employees receive four phasesof training in HVS. Each phaserequires two to three days. Phasesone and two introduce lean con-cepts and the associated tools.Phases three and four are orientedto what Nypro is trying to achievethrough lean from a strategic stand-point.

A key to the success of HVS isthat it is strategically driven. HVS isused as a vehicle to achieve theobjectives of Nypro's strategydescribed earlier. Two importantaspects of this system are the focuson velocity and standardization.The focus on velocity is importantfrom a couple of perspectives. First,to achieve high velocity, wastemust be eliminated from theprocess by reducing inventory andcosts. This increases the cash flowavailable to the company so thatgrowth can be financed. Second,achieving high velocity allows thecompany to better meet customerneeds. Specifically, Nypro is able tobring new products to market fasterfor their customers and offers shortproduction leadtimes for products.This is critical in obtaining andretaining key customers like Dell.


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HVS is also a vehicle to standardizeprocesses across all of Nypro'slocations. This is an important sell-ing point to the global customersthat Nypro is trying to acquire andretain.

Nypro has implemented HVSsuccessfully in all of its locationsand has many success stories. KimSimpson, Nypro's director ofprocess technology, described vari-ous specific successes during the

recent AME workshop. He particu-larly noted the success of the HVSimplementation at Nypro's Tianjin,China location. The Tianjin opera-tion offers the latest molding andassembly technologies of robotics,painting, in-mold decorating, label-ing, pad printing, and a variety ofother services as needed to satisfyNypro's customers. The team atTianjin has embraced the lean con-cepts embodied in HVS. This plant

has done a particularly good job ofusing process mapping to developimprovement actions to reducecycle time required for products.Figure 5 shows an example of howprocess mapping was used toimprove the plant's Sapphire FlipMolding Process.

The top of the figure shows theprocess map before HVS improve-ment. The bottom of the figureshows the process map after a


Figure 5. The team at Tianjin, China has done a particularly good job of using process mapping to develop improvement actions to reduce cycle timerequired for products; this example shows how process mapping helped to improve the plant's Sapphire Flip Molding Process.


series of HVS improvements. Byreorganizing the steps, the facilityreduced the number of operatorsrequired for this process from eightto five and the cycle time wasreduced by 1.8 seconds. The plantcontinuously used HVS improve-ment techniques on its product linebetween April 2001 and February2002. Over that time the averagecycle time per product was reduced30.6 percent and average outputwas improved by 48.3 percent. Theplant has also reduced its finishedgoods inventory to four days.

Nypro Continues ItsTransition

Nypro has made a great deal ofprogress during the past three yearsin transforming the company froma basic molder to a contract manu-facturer. It also continues to devel-op as a lean enterprise. A key tenetof lean is continuous improvement:

There are always ways to furtherimprove. This is true at Nypro. BrianJones, company president, tells thefollowing story that illustrates thenecessity of continuous improve-ment. Recently several managersfrom Nypro toured Toyota'sGeorgetown, KY plant. Before thetour, a request was made to see themolding operations in the plant.The Nypro group was shown a1000-ton molding machine that isused to produce dashboards. Thegroup asked how long it took tochange over the machine. Aftersome discussion within the Toyotateam, the leader answered that ittook 10-12 minutes but the goal iseight minutes. The largest moldingmachine Nypro has is 500 tons. Amachine of this size would be lesscomplex than the 1000-tonmachine used at Toyota and there-fore changeovers should be easier.Also, Nypro's expertise is in mold-ing operations, and Toyota expert-

ise is in auto assembly. However, itsmachine changeover time is anhour. This example shows thepotential for improvement thatexists at Nypro.

What will the future hold forNypro? With its transition to a leanenterprise and a history of transfor-mation, it is difficult for an outsiderto envision Nypro in the future.What is certain is that Nypro hasdeveloped a tremendous capacityto evolve and can deal with thechanging business environmentthat organizations face now and inthe future.

Jeff Schaller, Ph.D., is an associateprofessor of operations managementat Eastern Connecticut StateUniversity, Willimantic, CT.


© 2002 AME® For information on reprints, contact:Association for Manufacturing Excellence847/520-3282www.ame.org

46Target Volume 18, Number 4

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Update on Excellence The Nypro Example: A Strategic Approach to Molding ... · Update on Excellence The Nypro Example: A Strategic Approach to Molding ... During the 1980s Nypro Inc